Mergers and Acquisition

Mergers and Acquisitions
MERGER --ACQUISITION -- TAKE OVER
Presented By:
Baxis Patel (M.Phil – 2010)
Mergers
business Amalgamation
combination Acquisitions
Takeovers
Takeover
– The transfer of control from one ownership group to
another.
Acquisition
– The purchase of one firm by another
Merger
– The combination of two firms into a new legal entity
– A new company is created
– Both sets of shareholders have to approve the transaction.
Amalgamation
– A genuine merger in which both sets of shareholders must
approve the transaction
– Requires a fairness opinion by an independent expert on
the true value of the firm’s shares when a public minority
exists
When two or more companies

combines into one company
may merge with existing co,

Merger
form new company……
in India merger is called

Amalgamation
Merging Companies
are called
Amalgamating
Companies
Merger
New Company is
called
Amalgamated
Company
Merger
Through
Absorption
Merger
MERGER
THROUGH
CONSOLIDATION
Merger
Through
Absorption
An Absorption is Combination of

Merger
two or more companies into an
existing company
All companies except one lose

their identity
Western Union Bank Of New

New Bank Of
Bank Merged York Merged
India Merged
With With Mellon
With PNB
IDBI Financial
Merger
Through
Consolidation
Merger A consolidation is a combination of two or more

Companies into a new Company
All companies are dissolved to form a new Company

Merger
Through
Consolidation
Hindustan
Hindustan Indian Software
Instruments
Merger Computers Ltd Co .Ltd
Ltd
Indian
Reprographic
Ltd HCL LTD
Acquisition
An Acquisition may be an act of acquiring

effective control by one company over assets
or management of another company without
any combination of companies……..
Companies may remain independent, separate

But there may be change in control of
Companies……..
Acquisition
Obtaining Control over management of a Company
MRTP ACT-at least 25% voting right of a Company
Investment of more than 10% share into a company

Require approval of Shareholders & C Govt.
Dabur Pharma to acquire Thai company
Aditya Birla Group to acquire Trinethra
China’s largest Bank to take over

Indonesian Bank
Acquisition & Takeover
When Acquisition is unfriendly or hostile

It may be called Takeover
FORMS OF MERGER
Horizontal Vertical
Merger Conglomerate
Merger Merger
Cross border international M&A

1. Horizontal
• A merger in which two firms in the same industry
combine.
• Often in an attempt to achieve economies of scale and/or
scope.
2. Vertical
• A merger in which one firm acquires a supplier or another
firm that is closer to its existing customers.
• Often in an attempt to control supply or distribution
channels.
3. Conglomerate
• A merger in which two firms in unrelated businesses
combine.
• Purpose is often to ‘diversify’ the company by combining
uncorrelated assets and income streams
4. Cross-border (International) M&As
• A merger or acquisition involving a Canadian and a
foreign firm a either the acquiring or target company.
Faster Growth
Improving Profitability
Managerial Effectiveness
Merger Gaining Market Power
Objectives Leadership
Cost Reduction
Are there any alternatives to Mergers or acquisitions?

Joint Venture
Strategic Alliance
Eliminating Inefficient
Operations
Merger Productivity Improvement
Alternatives Hiring Capable
Managers
Limit Competition
Market Power
Diversification
Growth
Economy of Scale
MOTIVES & BENEFITS Access to Foreign Market
OF Resources
Displace existing Management
MERGERS Circumvent Govt Regulations
Aggressiveness
Diversifying Risk
Profitability
Accelerated Growth
MOTIVES & BENEFITS Expanding Existing Markets

OF Entering New Markets
MERGERS Expand Internally
Expand Externally
Developing Operating Facilities
Price Paid for Merger
Enhanced Profitability
MOTIVES & BENEFITS

OF
MERGERS Economies of Scale
Operating Economies
Synergy
Reduction in Tax Liability
MOTIVES & BENEFITS

OF
Carry forward Losses
MERGERS
Tax on Share
Financial Benefits
Eliminating Financial Constraints

MOTIVES & BENEFITS Deploying Surplus Cash
OF
MERGERS Enhancing Debt Capacity
Lowering Financial Costs

Increased Market Power
Market Share
MOTIVES & BENEFITS Bargaining Power

OF
MERGERS Technological Advancement
Pricing
Limiting Competition
Planning
Steps in Search &
Analysis Screening
Of
Mergers Financial
& Evaluation
Acquisitions
Mode of
Merger
Negotiation
Post
Merger
Objective of Acquisitions
Steps in Planning Strengths & Weaknesses

Business Units-dropped
Analysis or Added
Of
Mergers
&
Acquisitions Industry Data
Target Firm
Quality Of Mgt
Market Growth Market Share Size
Competition Capital Structure
Ease Of Entry Profitability
Capital & Labour Production &Marketing
Degree of Regulation Capabilities etc
Search &
Screening
Steps in
Analysis
Of
Mergers
& Where to look for candidates
Acquisitions Is it too large or small
Engaged in related or unrelated Activity
Export oriented or Local
Amenable or not amenable to merger
Financial
Evaluation
Steps in
Analysis
Of
Mergers Current
& Market
Acquisitions Value
Determining
•Earnings
•Cash flows
•Areas Of Risk Premium
•Maximum Price Payable Value
•How to Finance Merger
Mode of
Merger
Steps in
Analysis
Of
Mergers
& Regulations
Acquisitions
Time frame
Resources
Degree of control
Assume hidden
liabilities
Negotiation
Steps in
Analysis
Of
Mergers
&
Acquisitions
Your intentions should be to pay one dollar
more than the value to the next highest bidder
and an Amount that is less than the value to you
Post
Merger
Steps in
Analysis
Of Check Hostility
Mergers
& Anticipate Problems
Acquisitions “Art of taking over
Solve Problems Company
Without overtaking
Treat people
It”
With Dignity
Value Created by Merger
Economic Advantage (EA) if

VPQ > (VP + VQ)
Where VPQ =Combined PV of merged firms
VP= Worth of Firm P
VQ=Worth of firm Q
Mergers
Value Created by Merger
and Acquisitions
Economic Advantage
EA = VPQ - (VP + VQ)

Mergers
Few Mergers, Acquisitions,
and Acquisitions
Take over
New Bank Of India merged with Punjab National Bank

Global Trust Bank Taken over by OBC
Western United Bank taken over by IDBI
International Data Management By HCL Ltd
Chhabrias took over Shaw Wallace, Dunlop
Ashok Leyland By Hindujas
Spensers By Goenkas
VSNL by Tata
Tata Tea Ltd Acquired Consolidated Coffee Company
Tomco with HLL
Tata Fertilizers Merged With Tata Chemicals
Sundaram Clayton Merged With TVS-suzuki Ltd
MITTAL STEEL'S ACQUISITION OF ARCELOR
THANK YOU

Mergers and Acquisition

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Mergers and Acquisitions

MERGER --ACQUISITION -- TAKE OVER

When two or more companies

may merge with existing co,

in India merger is called

An Absorption is Combination of

All companies except one lose

Western Union Bank Of New

Merger A consolidation is a combination of two or more

All companies are dissolved to form a new Company

An Acquisition may be an act of acquiring

Companies may remain independent, separate

Obtaining Control over management of a Company

MRTP ACT-at least 25% voting right of a Company

Investment of more than 10% share into a company

Dabur Pharma to acquire Thai company

Aditya Birla Group to acquire Trinethra

China’s largest Bank to take over

Acquisition & Takeover

When Acquisition is unfriendly or hostile

Cross border international M&A

Are there any alternatives to Mergers or acquisitions?

MOTIVES & BENEFITS Expanding Existing Markets

MOTIVES & BENEFITS

Reduction in Tax Liability

MOTIVES & BENEFITS

Eliminating Financial Constraints

Lowering Financial Costs

Increased Market Power

MOTIVES & BENEFITS Bargaining Power

Steps in Planning Strengths & Weaknesses

Value Created by Merger

Economic Advantage (EA) if

EA = VPQ - (VP + VQ)

New Bank Of India merged with Punjab National Bank

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